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6 Major Landlord Changes

In the last 12 months 6 new major law changes have been introduced

1. SMOKE & CARBON MONIXIDE ALARMSNew rules were introduced on 1 October 2015 stating that all privately let properties must have a smoke alarm on any living space level and these alarms must be tested before a new tenancy starts.

2. ISSUING EPC AND THE RENT GUIDE TO TENANTSTenants must be issued with the EPC and the new government guide HOW TO RENT before a tenancy starts. Failure to do this will result in delays if the landlord needs to evict a tenant.

3. IMMIGRATION STATUS CHECKS RIGHT TO RENTFrom 1 February 2016, private landlords must check the immigration status of tenants. This includes reviewing evidence of the tenant’s identity, citizenship, passport or biometric residence permit.

If landlords allow tenants without a so-called ‘right to rent’ to occupy their property, they could face penalties of up to £3,000 per tenant. The new law also applies to people who sub-let or take in lodgers.

4. BUY TO LET MORTGAGE EU CHANGEUnlike home owners, all buy to let landlords have been able to buy their mortgages in an unregulated section of the mortgage market, until now.

From 21 March 2016 the buy-to-let mortgage market will be split into two: those landlords who take out a buy-to-let mortgage as a “business” operation, i.e., a project to buy a second or more homes to make money; these will remain unregulated.

On the other hand, those who rent out their own home as a temporary expedient, such as when they want to work away for a time, or when they can’t sell and want to buy somewhere else, their type of buy-to-let mortgage borrowing will come under the regulatory control of the Financial Conduct Authority (FCA) – it will be classed as a consumer mortgage as opposed to as business one.

5. STAMP DUTY INCREASE ON 2ND PROPERTIESAnyone purchasing a second home will have to pay a 3 per cent surcharge on top of the normal rates of stamp duty from April 1st this year, and the final policy will be confirmed in the budget on March 16th. The government justifies the tax changes by the fact that they will use the money raised to help build new homes.The extra 3% may not sound too catastrophic, but it actually will treble the stamp duty bill on a £275,000 buy-to-let from £3,750 to £12,000.

6. TAX RELIEFAnother change that will hit buy-to-let investors is tax relief for individual landlords who will be restricted to the 20% basic rate of tax. This will be phased in from 6 April 2017 until relief is completely restricted to the basic rate by 2020/21.

“Landlords will no longer be able to deduct the cost of their mortgage interest from their rental income when calculating a profit on which to pay tax. Ensuring the maths works out correctly on every new purchase is essential, as the tax relief you are able to claim on monthly interest repayments has reduced compared to the existing 45% – regardless of your personal top tax rate. For higher-rate tax payers, this means effectively paying tax on mortgage interest, in addition to the interest itself.”